ERCA’s solution to clear congested dry ports

The Ethiopian Revenue and Customs Authority (ERCA) says that it has been unable to collect more than two billion birr from customs

duty due to the congestion in the dry ports around the country. In a bid to ease the problem, the authority has decided to release the goods to their importers on condition that they provide payment guarantee from their banks. The Ethiopian Shipping and Logistic Service Enterprise (ESLSE) is to provisionally cover the demurrage and storage cost valued at more than 400 million birr.  
The Ethiopian Shipping and Logistic Service Enterprise (ESLSE) claims that more than 8,000 containers are still stocked at Mojo Dry Port though they sent repeated notices to importers to collect their goods.  According to sources, the problem persists partly due to lack of expertise and capacity on the part of ESLSE and partly due to lack of finance on the part of importers.
Could ERCA’s move clear the dry ports? 
“More than two billion birr customs revenue is tied up due to the uncollected shipments that cause the congestion at the dry ports. To solve the problem and reinitiate the well functioning of the economy, the authority has discussed with financial institutions and ESLSE and has decided to deliver the containers through underwriting procedure. That is in the case of financial inaccessibility, the authority will allow importers to collect their containers through underwriting by providing bank guarantee. In such cases, the custom duty will have to be cleared within six months,” said Melaku Fenta, Director General of ERCA at a discussion panel with leaders of the business community.  
“Due to the congestion in the dry ports, we are unable to receive incoming shipments. We need to play our part and solve the problem in the shortest possible time,” Melaku pledged at the discussion held on January 09, 2013.   
The ESLSE had published a list of 355 companies whose containers lie at the Mojo Dry Port back in November 2012, urging them to clear their goods to ease the congestion and increase the authority’s revenue collection effort. The announcement warned importers that it will take actions if they do not collect their cargoes immediately from the dry port. But the port remains congested as the incoming containers surpass the outgoing one. This has initiated an expansion of the dry port at a cost of 650 million birr on 10 hectares of land adjacent to the existing facility. It is expected to be completed at the end of this year.  
Meanwhile, the problem has been magnified since the government decided to put the multimodal scheme under the mandate of the state owned monopoly, ESLSE. ESLSE is formed by merging the Ethiopian Shipping Lines, Ethiopian Maritime Services Enterprise and Ethiopian Dry Ports Enterprise in the beginning of the past budget year. The multimodal scheme was introduced to get imports directly into the country instead of stopping over in Djibouti for customs clearance. Hence once the goods are collected directly from the vessels in Djibouti and loaded on trucks that bring them to their importers in Ethiopia.
Different actors of the economy have been complaining repeatedly about drawn out customs clearance procedures and complicated transportation and logistics services managed by ESLSE apart from the lack of finance.
In a bid to ease the impact of finance shortages, importers who have five or more containers will be provided with a waiver document until March 15, 2013. The ESLSE will temporarily cover the cost of storage, transport and demurrage, according to Getachew Mengiste, State Minister of Transport. 
There are more than 8,000 containers in the dry port at present. ESLSE has covered the cost of transport, (both land and sea), custom clearance at Djibouti port, storage and demurrage for 67 percent of the stated number of containers. The total cost is summed up to more than 400 million birr according to Ewnetu Taye, Director of Multimodal Service at ESLSE.
According Ethiopian Freight Forwarders and Shipping Association, the setbacks in the dry port resulted because the services that were provided by different stakeholders were overtaken by a single state owned business entity. The association also acknowledges the lack of trucks, dispute with regards to import tariff between importers and the enterprise, limited capacity of the dry ports and sometimes lack of finance on the part of the importers as aggravating factors behind the problem.
“The issue of lack of finance has been discussed with the Ethiopian Bankers Association. The leaders of the banks have agreed to play their part,” said Bekalu Zeleke, President of the Commercial Bank of Ethiopia.
Importers who have been complaining that their goods were stacked at the Port of Djibouti for more than eight months were not present to collect their goods after repeated notices due to lack of finance.
“The finance problem was critical. It has created all the backlogs in addition to the problem that arise from the multimodal system introduced by the ESLSE. I believe the critical problem of finance is about to ease. I appreciate the move taken by respective government offices,” said a participant among the business leaders.
ERCA’s bold performance
The federal government tasked ERCA to bring in about 71 billion birr through taxes and lottery sales’ profit to partially cover the 2011/12 Ethiopian budget of 117.8 billion birr.  It collected 70.75 billion birr fulfilling the government ambition though it fell a little short of its own target of 76 billion birr.
Coupled with the additional 12 billion birr collected by regional states, the authority amassed 89 billion birr in the last budget year of which 86 billion birr came from tax collections. This represents 47 percent revenue growth as compared to what the nation collected in the 2010/11 budget year.
ERCA also handled the country’s import and export activity worth 192 billion birr and 3.2 billion dollar, respectively.
During this fiscal year [2012/13] the authority plans to raise 101 billion birr portraying a 44 percent growth compared to what it collected in the previous budget year.
The total work force of ERCA is a little over 7,500 which fulfill only about 70 percent of the authority’s human resource need.   
Ethiopia’s imports used to be undertaken through the ‘uni-modal’ system of freight forwarding and shipping in which both the state and the private operate. However, the country switched to multimodal system which mandates the state owned enterprise ESLSE to handle all the operation associated with forwarding and shipment of goods that are imported in to the country.